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Why did China pause bank lending this month?

An important change affected China market and later the US market at the beginning of this week is that the

Chinese authorities stopped bank lending for the rest of this month. Now the dominant interpretation for this policy

is China is tightening liquidity abruptly. The US market has reacted as two days' big sliding. 

Absorbing liquidity is undoubtedly a big issue for most countries in next couple of years. However, the tightening

process for China would be more smoother than most people's anticipation given that China government's first priority has been social stability. 

So what does the new policy really mean? Any Chinese people working in state owned banks will easily answer

this question. State owned banks have a custom of lending more in the first half of fiscal month and fiscal year in

order to achieve lending targets earlier. Historical bank lending records will show this uneven pattern. Chinese

authorities apparently have started treating such unhealthy lending pattern. This is the only implication for the new

policy this week. Nothing more.

Peace, US market.
 




Disclosure:
 I have both US stocks and Chinese stocks.